A Conclusive Evidence Clause That is Conclusive

    June 2014

    In the case of ABN Amro Commercial Finance PLC v McGinn and others [2014], the UK High Court has ruled on the nature of conclusive evidence clauses and has upheld the clauses’ intended purpose – to circumvent protracted debates as to the validity of the underlying loss being certified.

    The Court also concluded that the deeds of indemnity provided by the defendants created liability which was primary rather than secondary in nature. Both determinations signal a clear recognition by the Judiciary that surety agreements, properly obtained, can and will be enforced.

    The Court’s judgment arose from a Summary Judgment Application brought by the claimant. The claimant was an invoice discounter who had provided financing to its client. The defendants were all former directors of the client and had provided deeds of indemnity, which the claimant now sought to enforce.

    The defendants denied liability under their indemnities, arguing inter alia that their liability was secondary and not primary in nature and was therefore discharged by what they called material variations to the underlying agreement. They also argued that the claimant had not taken proper steps to collect and enforce the debts of the client and, by doing so, the inclusion within the certified sum of any debt which could and should have been collected was a manifest error.

    The claimant in turn argued that the defendants’ liability was plainly primary in nature and therefore any variation to the underlying obligation did not impact their own personal liability. With regards to the certificate, the claimant relied upon the terms of the defendants’ indemnities which expressly stated that the defendants agreed to be bound by such certificates which should be treated as conclusive evidence of their liability, save for manifest error.